FedEx COO expects operating profit and margin to improve in H2

Shares of FedEx Corp (NYSE: FDX) are up nearly 10% in extended trading on market-beating quarterly results, strong guidance for the future, and a new share buyback programme.

COO Subramaniam’s remarks on CNBC’s ‘Closing Bell’

Labour and supply chain costs resulted in a $470 million hit to FedEx this quarter, but COO Raj Subramaniam is confident it was an event limited to the first half only. On CNBC’s “Closing Bell”, he said:

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We had 111,000 applicants to the FedEx team last week. In May, that number was 52,000. Because of that, the headwinds we saw in H1 will recede in H2, when we expect operating profit and operating margin to improve. We’re in the middle of strong demand and pricing environment.

Subramaniam attributed a sharp surge in applicants to the company’s “bold actions” like better wages and benefits and flexibility of the working hours.

Key takeaways in the Q2 earnings report

FedEx said its net income slid to $1.04 billion ($3.88 per share) from last year’s $1.23 billion ($4.55 per share). On an adjusted basis, it earned $4.55 per share versus $4.83 in Q2 of fiscal 2021. Operating income, however, was up 9.0% YoY.

The shipping and logistics company generated $23.5 billion in revenue that represents an annualised growth of nearly 25%, as per the earnings press release. According to FactSet, experts had forecast $4.28 of adjusted EPS on $22.41 billion in revenue.

For the full financial year, FedEx now forecasts up to $21.50 in per-share earnings excluding year-end mark-to-market (MTM) accounting adjustments and other costs. In comparison, analysts were calling for $19.75 in adjusted EPS this year.

The Memphis-headquartered company’s board on Thursday authorised another $5.0 billion in stock repurchase on top of $548.6 million still pending from the previous authorisation. FedEx valued its cash stature at $6.8 billion at the end of Q2 and forecasts $7.2 billion in capital spending this year.